It’s time to cut Texas, North Carolina, Nevada and Colorado down to size.
They are among the states that are successful at siphoning jobs from California, arguing they are more business friendly as well as less costly places to conduct business.
A big part of that are wages. And while most businesses that relocate and expand typically pay above the California minimum wage that is now at $12 an hour on the way to $15 by 2022, the $15 benchmark the Golden State is headed to is roughly twice the minimum wage of the states that peel off jobs from California.
There is now, however, an all states minimum wage push that is being pursued on the federal level.
Although there are solid arguments against minimum wage hikes based on the fact they do cost jobs and their ultimate impact is erased due to it pushing up the cost of goods and services over the years, if you are a Californian and are against the federal minimum wage hike to $15 an hour, you need to be a tad selfish and embrace it instead.
Let Texas and North Carolina lose a large part of their competitive edge as being places of relatively low cost for living thanks to an act of Congress.
Let’s say a Silicon Valley firm that has 1,000 workers relies on 100 workers that they pay minimum wage. If they were in Texas today, they would be paying a minimum wage of $7.25 an hour. That’s $4.75 less per hour per employee. That comes to $3,800 more a day or $197,760 more a year that you have to pay a minimum wage employee in California than in Texas.
But if Texas is forced to raise its minimum wage, the cost of everything your higher paid employees pay to live in Texas from dining out and gardening service to haircuts and handymen will go up. That means pressure to raise their pay.
Of course, the cost of living in Texas goes up also for teachers, city employees and other government workers. A parks maintenance worker in Dallas makes $27,160 a year or $13.05 an hour. The average Dallas police officer makes $49,461 a year or $23.70 an hour. If Texas has a $15 an hour minimum wage instead of $7.25 they’d be forced to raise the pay of employees not just to the minimum wage but beyond. Right now that parks worker is making $5.80 more than minimum wage. In a competitive job market, the City of Dallas will be forced to sustain that margin. That means a park worker costing $13.05 an hour will cost $20.80 an hour with a $15 minimum wage. The $7.75 difference isn’t all. Payroll costs go up whether it is for Social Security, retirement plan or other government surcharges. Those police officers are also going to have to be paid at least that much more an hour to retain them or to recruit them.
Ultimately taxes will have to go up. Given pay and benefits are typically 75 to 80 percent of the cost of a city budget, it will take a big hit in tax increases or massive cuts in government services. Everything will go up — garbage bills, the cost of water, the cost to flush your toilet, the cost of electricity, the cost of food — you name it. Welcome to California. Wages of employees are the biggest budget item for government as well as most businesses.
All of a sudden that move or expansion to Texas isn’t that enticing.
Of course, there are other factors that go into making decisions on whether to relocate a business such as state regulations. And while California can define overkill at times with insane redundancy and long drawn out approval processes, other states are starting to play catch up.
Go ahead and feel the “Bern” given it was Senator Bernie Sanders who first had the courage to make a $15 an hour federal minimum wage a major national taking point.
While it would be nice for people to practice what they preach — ask his campaign workers what is meant by that — a $15 federal minimum wage would benefit California by helping it become more competitive for business.
That, in turn, will benefit all California workers.
Let Congress make California more competitive by making the rest of the nation more like California.